ADVANCED ENERGY INDUSTRIES INC

Previous wording

We continue to execute our previously announced manufacturing consolidation plan which includes the shutdown of our Zhongshan, China manufacturing site. Manufacturing operations have ceased with final closure activities remaining to be completed by early 2026. We remain focused on the introduction and launch of our new product initiatives. Additionally, we are monitoring tariffs announced by the U.S. government and the impact of any additional tariffs or other trade policy measures on our supply chain or to our customers. While the tariff impact was not material to our results in the first half of 2025, the effects could be material in future periods as any further tariff or other trade policy measures, retaliatory responses to the U.S. trade policy announcements, or any related macroeconomic effects could adversely impact our product demand, production costs, or ability to sell our products and provide services.

Current wording

We remain focused on the introduction and launch of our new product initiatives. Additionally, we are monitoring tariffs announced by the U.S. government and the impact of any additional tariffs or other trade policy measures on our supply chain or to our customers. While the tariff impact was not material to our results in the first nine months of 2025, the effects could be material in future periods as any further tariff, export control, or other trade policy measures, retaliatory responses to the U.S. trade policy announcements, or any related macroeconomic effects could adversely impact our product demand, production costs, or ability to sell our products and provide services.

Previous wording

Advanced Energy generates revenue from the sale of a broad range of advanced and system power products and services to global original equipment manufacturers (“OEMs”) and end customers. Our customers select our products based on various performance metrics such as high power conversion efficiency, high power density, and low noise emission, as well as our ability to tailor our solutions to meet the unique requirements of their critical applications. The future growth and demand for our products is driven by a combination of factors within each of the end markets we serve, as follows:

Current wording

Advanced Energy generates revenue from the sale of a broad range of advanced and system power products and services to global original equipment manufacturers (“OEMs”), distributors, and end customers. Our customers select our products based on various performance metrics such as high power conversion efficiency, high power density, and low noise emission, as well as our ability to tailor our solutions to meet the unique requirements of their critical applications. The future growth and demand for our products is driven by a combination of factors within each of the end markets we serve, as follows:

Previous wording

The Semiconductor Equipment market continued to be driven by growing demand for leading-edge devices in logic and memory used in AI applications, largely offset by lower trailing-edge demand due to capacity underutilization, particularly in China, U.S. export restrictions to China, and the potential impact of tariffs on the macroeconomic environment. We expect these mixed market trends to continue into the second half of 2025.

Current wording

The Semiconductor Equipment market continued to be driven by demand for leading-edge devices in logic and memory used in AI applications, offset by lower trailing-edge demand due to capacity underutilization, particularly in China, U.S. export restrictions to China, and the potential impact of tariffs on the macroeconomic environment. We expect these mixed market trends to continue into early 2026, with potential acceleration of demand in the second half of 2026.

Previous wording

The Industrial and Medical market has been going through a major downturn that started in mid-2023 driven by macroeconomic conditions and customer rebalancing elevated inventories as a result of supply chain disruptions in prior years. These factors continued into the first quarter of 2025, but in the second quarter of 2025, sequential growth resumed as customer inventories began to approach normalized levels. We expect this trend to continue in the second half of 2025 but potentially be limited by the impact of tariffs on the macroeconomic environment.

Current wording

The Industrial and Medical market has started to recover starting in the second quarter of 2025 following a major industry downturn as a result of macro conditions and supply chain disruptions from prior years. The positive trend continued in the third quarter as customer inventories approached normalized levels. We expect this trend to continue in the coming quarters but be paced by uncertainty in the macroeconomic environment.

Previous wording

The Data Center Computing market is driven by the rapid growth of AI and related investments. The accelerated pace of introduction of next generation AI processors has increased the power requirements for AI-based servers and racks, accelerated the transition to high-power 48-volt power shelf infrastructure, and increased the importance of high power efficiency, density, and reliability for server rack power solutions.

Current wording

The Data Center Computing market is driven by the rapid growth of AI and related investments. The accelerated power rating of next-generation AI processors and increased density of AI processors in each IT rack have exponentially increased the power requirements for AI-based servers and racks which, in turn, increased the importance of high power efficiency, density, and reliability for server rack power solutions.

Previous wording

Growing investments in AI applications by leading hyperscale customers combined with adoption of our next generation high-power solutions drove meaningful growth to our data center computing business in the first half of 2025. We expect these trends will continue to support robust demand in the second half of 2025.

Current wording

Increased investments in AI applications by leading hyperscale customers, along with adoption of our next- generation high-power solutions, more than doubled our revenue in the data center computing market during the first nine months of 2025. We expect robust end market demand and adoption of newer, higher power solutions will continue to support robust demand for the remainder of 2025 and into 2026.

Previous wording

Demand in the Telecommunication and Networking market is driven by adoption of more advanced mobile standards, such as 5G technologies, networking investments by telecommunication service providers, enterprises upgrading their communication networks, and data centers investing in their networks for AI-driven increased bandwidth.

Current wording

Demand in the Telecommunication and Networking market is driven by adoption of more advanced mobile standards, such as 5G technologies, networking investments by telecommunication service providers, enterprises

Previous wording

End demand in the Telecom and Networking market remained stable in the first half of 2025, and we expect current market conditions to continue for several quarters.

Current wording

End demand in the Telecom and Networking market remained stable in the first nine months of 2025, and we expect current market conditions to continue for several quarters, with some potential improvement driven by AI related demand.

Previous wording

The increase in Semiconductor Equipment revenue was primarily due to continued cyclical recovery and strong demand for platforms used in leading-edge process tools.

Current wording

Semiconductor Equipment revenue for the three months ended September 30, 2025 was relatively flat as compared to the same period in the prior year. The increase in revenue for the nine months ended September 30, 2025 was primarily due to increased demand for platforms used in leading-edge process tools.

Previous wording

The increase in gross profit and gross margin was largely due to an increase in revenue and manufacturing cost improvements. Manufacturing cost reduction programs positively impacted gross margin by 110 and 190 basis points, respectively, during the three and six months ended June 30, 2025.

Current wording

The increase in gross profit and gross margin was largely due to an increase in revenue and manufacturing cost improvements. Manufacturing cost reduction programs positively impacted gross margin by 160 and 140 basis points, respectively, during the three and nine months ended September 30, 2025.

Previous wording

The increase in R&D was related to higher compensation costs, related to stock-based compensation and annual merit increases, and higher program and materials costs compared to the same period in the prior year.

Current wording

The increase in research and development expense was related to higher compensation costs, related to stock-based compensation and annual merit increases, and higher engineering program and materials costs compared to the same period in the prior year.

Previous wording

The increase in restructuring, asset impairments, and other charges is primarily driven by the timing of our restructuring plan decisions.

Current wording

The decrease in restructuring, asset impairments, and other charges is primarily driven by the timing of our restructuring plan decisions.

Previous wording

During the second quarter of 2025, we approved actions related to consolidating our research and development, sales, and administrative functions in connection with our manufacturing and footprint consolidation. We expect these actions to be substantially complete by the end of 2026 and do not expect to incur significant additional charges.

Current wording

During the second quarter of 2025, we approved actions related to consolidating our research and development, sales, and administrative functions in connection with our manufacturing and footprint consolidation. We expect these actions to be substantially complete during 2027 and do not expect to incur significant additional charges.

Previous wording

We experienced a decrease in interest income and expense caused by lower cash balances as a result of using cash on hand to fully prepay our Term Loan in September 2024.

Current wording

We experienced a decrease in interest income and expense caused by lower cash and debt balances as a result of using cash on hand to fully prepay our Term Loan in September 2024.

Previous wording

Other income (expense), net consists primarily of foreign exchange gains and losses and other miscellaneous items. We had unrealized foreign exchange losses during the current period compared to unrealized gains in the same period in the prior year.

Current wording

Other income (expense), net consists primarily of foreign exchange gains and losses and other miscellaneous items. For the three months ended September 30, 2025, we had a $4.8 million increase in unrealized foreign exchange gains and a $4.3 million improvement in other income (expense) compared to the same period in the prior year. The prior-year results included nonrecurring foreign currency translation adjustments related to the liquidation of certain foreign operations as well as the write-off of debt discount fees associated with the early repayment of our Term Loan Facility.

Previous wording

The following table summarizes tax provision and the effective tax rate for our income from continuing operations:

Current wording

The following table summarizes tax provision (benefit) and the effective tax rate for our income (loss) from continuing operations:

Previous wording

Our effective tax rates differ from the U.S. federal statutory rate of 21% primarily due to the benefit of earnings in foreign jurisdictions which are subject to lower tax rates, as well as tax credits, partially offset by net U.S. tax on foreign operations and the net effect of Pillar II top-up taxes. The effective tax rate for 2025 was lower than the same period in 2024 primarily due to a more favorable mix of earnings.

Current wording

Our effective tax rates differ from the U.S. federal statutory rate of 21% primarily due to the benefit of earnings in foreign jurisdictions which are subject to lower tax rates, as well as tax credits, partially offset by net U.S. tax on foreign operations and the net effect of Pillar II top-up taxes. The effective tax rate for the three months ended September 30, 2025 was higher compared to the same period in 2024, primarily due to the absence of restructuring charges that were recorded in the prior-year period related to our Zhongshan, China factory closure resulting in an income tax benefit. The current quarter also included a net benefit from discrete tax items, consisting of a partial release of a valuation allowance, partially offset by the impact of tax law changes and other discrete adjustments.

Previous wording

On July 4, 2025, the One Big Beautiful Bill (OBBB) Act, which includes a broad range of elective tax law items available in 2025 and prescribed tax law changes in 2026, was signed into law in the United States. While we continue to assess the potential impact of the OBBB, we currently do not expect the OBBB to have a material impact on our estimated annual effective tax rate in 2025.

Current wording

On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act, which includes a broad range of elective tax law items available in 2025 and prescribed tax law changes in 2026, was signed into law in the United States. The Company has reflected the impact of the OBBB’s elective tax law items in its financial statements for period ending September 30, 2025.

Previous wording

The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses. In addition, we exclude discontinued operations and other items such as acquisition-related costs, facility, infrastructure, and other transition costs, and restructuring expenses, as they are not indicative of future performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments.

Current wording

The non-GAAP results presented below exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses. In addition, we exclude discontinued operations and other items such as acquisition-related costs, facility, infrastructure, and other transition costs, and restructuring expenses, as they are not indicative of future performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments. Finally, non-GAAP results also exclude non-recurring discrete tax expenses or benefits.

Previous wording

As of June 30, 2025, our cash and cash equivalents totaled $713.5 million, while our available funding under our Revolving Facility was $600.0 million. Additionally, we generated $75.7 million of cash flow from continuing operations in the six months ended June 30, 2025. We believe our sources of liquidity will be adequate to meet operational needs, including capital expenditures, as well as anticipated debt service, share repurchase programs, dividends, and strategic investments.

Current wording

As of September 30, 2025, our cash and cash equivalents totaled $758.6 million, while our available funding under our Revolving Facility was $600.0 million. Additionally, we generated $154.6 million of cash flow from continuing operations in the nine months ended September 30, 2025. We believe our sources of liquidity will be adequate to meet operational needs, including capital expenditures, as well as anticipated debt service, share repurchase programs, dividends, and strategic investments.

Previous wording

During the six months ended June 30, 2025, we paid quarterly cash dividends of $0.10 per share, totaling $7.7 million. We currently anticipate that a cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors.

Current wording

During the nine months ended September 30, 2025, we paid quarterly cash dividends of $0.10 per share, totaling $11.6 million. We currently anticipate that a cash dividend of $0.10 per share will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, business conditions, and other factors.

Previous wording

During the six months ended June 30, 2025, we paid $23.7 million to repurchase 282,232 shares of our common stock at an average share price of $84.19.

Current wording

During the nine months ended September 30, 2025, we paid $23.7 million to repurchase 282,232 shares of our common stock at an average share price of $84.19.

Previous wording

Net cash from operating activities from continuing operations for the six months ended June 30, 2025 was $75.7 million, as compared to $14.9 million for the same period in the prior year. This $60.8 million increase was primarily due to higher net income from continuing operations. Additionally, we had favorable changes in accounts payable. This was partially offset by unfavorable changes in inventories, accounts receivable, and other liabilities and accrued expenses.

Current wording

Net cash from operating activities from continuing operations for the nine months ended September 30, 2025 was $154.6 million, as compared to $50.4 million for the same period in the prior year. This $104.2 million increase was primarily due to higher net income from continuing operations driven by growth in the Data Center Computing and Semiconductor Equipment markets. Additionally, we had unfavorable changes in working capital from inventories, accounts receivable, and other liabilities and accrued expenses which was partially offset by timing of payments.

Previous wording

Net cash used in investing activities for the six months ended June 30, 2025 was $43.6 million primarily due to $42.0 million in purchases of property and equipment, which was largely driven by investments in our manufacturing footprint and capacity, and $1.6 million in purchases of investments.

Current wording

Net cash used in investing activities for the nine months ended September 30, 2025 was $71.9 million primarily due to $69.9 million in purchases of property and equipment, which was largely driven by continued investments in our manufacturing footprint and capacity, and $2.0 million in purchases of investments.

Previous wording

Net cash used in investing activities for the six months ended June 30, 2024 was $47.6 million primarily due to $31.4 million in purchases of property and equipment, which was largely driven by investments in our manufacturing footprint and capacity, $13.8 million for the Airity Acquisition, and $2.4 million in purchases of investments.

Current wording

Net cash used in investing activities for the nine months ended September 30, 2024 was $60.5 million primarily due to $44.0 million in purchases of property and equipment, which was largely driven by investments in our manufacturing footprint and capacity, $13.8 million for the Airity Acquisition, and $2.7 million in purchases of investments.

Previous wording

Net cash used in financing activities for the six months ended June 30, 2025 was $42.8 million and included $23.7 million for repurchase of common stock, $8.0 million in net payments related to stock-based award activities, and $7.7 million for dividend payments. In addition, we paid $1.9 million in fees related to entering the Credit Agreement and $1.5 million for the release of the holdback associated with the Airity Acquisition.

Current wording

Net cash used in financing activities for the nine months ended September 30, 2025 was $47.0 million and included $23.7 million for repurchase of common stock, $8.3 million in net payments related to stock-based award activities, and $11.6 million for dividend payments. In addition, we paid $1.9 million in fees related to entering the Credit Agreement and $1.5 million for the release of the holdback associated with the Airity Acquisition.

Previous wording

Net cash used in financing activities for the six months ended June 30, 2024 was $23.2 million and included $10.0 million for repayment of long-term debt, $7.7 million for dividend payments, and $5.5 million in net payments related to stock-based award activities.

Current wording

Net cash used in financing activities for the nine months ended September 30, 2024 was $374.5 million and included $355.0 million for repayment of long-term debt, $11.6 million for dividend payments, $1.8 million for repurchase of common stock, $6.0 million in net payments related to stock-based award activities, and a $0.1 million payment for debt issuance costs.

Previous wording

During the six months ended June 30, 2025, foreign currency translation had a minimal impact on cash. See “Foreign Currency Exchange Rate Risk” in Part I, Item 3 for more information**.**

Current wording

During the nine months ended September 30, 2025, foreign currency translation had a minimal impact on cash. See “Foreign Currency Exchange Rate Risk” in Part I, Item 3 for more information**.**